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Submitted Electronically September 22, 2015

Office of Regulations and Interpretations 

Employee Benefit Security Administration 

Room N-5655 

U.S. Department of Labor 

200 Constitution Avenue, NW 

Washington, DC 20210 

Office of Exemption Determinations 

Employee Benefits Security Administration 

Attn: D-11712, D-11713, D-11850 

U.S. Department of Labor 

200 Constitution Avenue N.W., Suite 400 

Washington, D.C. 20210 

RE: Additional Comments Related to the Department of Labor’s Proposed 

Regulatory Package on the Definition of the Term “Fiduciary” (RIN 1210-

AB32)

Dear Sir or Madam: 

The Principal Financial Group®appreciates the opportunity to provide additional 

comments on the following United States Department of Labor’s (Department) 

proposals: (1) Definition of the Term “Fiduciary” under the Employee Retirement 

Security Income Act of 1974 (“ERISA”); Conflict of Interest Rule—Retirement 

Investment Advice,1(2) Best Interest Contract Exemption (the “BIC Exemption”),2(3) 

Principal Transaction Exemption,3and (4) related amendments to four existing 

 

1

 DEP’T OF LABOR, EMPLOYEE BENEFITS SECURITY ADMIN., Definition of Term “Fiduciary”; Conflict of Interest 

Rule—Retirement Investment Advice [RIN: 1210-AB32], 80 Fed. Reg. 21928 (Apr. 20, 2015) (the “ReProposing Release”), available at http://www.gpo.gov/fdsys/pkg/FR-2015-04-20/pdf/2015-08831.pdf. 

2

 DEP’T OF LABOR, EMPLOYEE BENEFITS SECURITY ADMIN., Proposed Best Interest Contract Exemption, 

Application No. D-11712 [ZRIN: 1210-ZA25], 80 Fed. Reg. 21960 (Apr. 20, 2015), available at

http://www.gpo.gov/fdsys/pkg/FR-2015-04-20/pdf/2015-08832.pdf. 

3

 DEP’T OF LABOR, EMPLOYEE BENEFITS SECURITY ADMIN., Proposed Class Exemption for Principal 

Transactions in Certain Debt Securities between Investment Advice Fiduciaries and Employee Benefit 

Plans and IRAs, Application No. D-11713 [ZRIN: 1210-ZA25], 80 Fed. Reg. 21989 (Apr. 20, 2015), 

available at http://www.gpo.gov/fdsys/pkg/FR-2015-04-20/pdf/2015-08833.pdf. 
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prohibited transaction class exemptions4(collectively, the “Proposed Rule”) in light of 

both market volatility subsequent to the original comment period as well as testimony at 

the public hearings held on August 10th through August 13th. Following these events, 

we feel the comments in our original letter are validated to an even greater extent. 

The additional comments we offer for the Department’s consideration emphasize two 

specific elements of the proposal discussed at the hearings; the necessary timeframe 

for industry to adequately comply with a final regulation and the need for clarification in 

the rule stating that a “call to action” is necessary to trigger fiduciary advice. 

Implementation 

As outlined in our original letter, even normal project requirements that address less 

complex issues take substantially longer than the eight months provided in the 

Proposed Rule. Given the extraordinary requirements of the Proposed Rule, the 

Department must consider extending the implementation period to at least 24 months. 

We offer for the Department’s consideration the following additional points that support 

the need for a longer implementation period. 

 

4

 DEP’T OF LABOR, EMPLOYEE BENEFITS SECURITY ADMIN., Proposed Amendment to Prohibited Transaction 

Exemption (PTE) 75-1, Part V, Exemptions from Prohibitions Respecting Certain Classes of Transactions 

Involving Employee Benefit Plans and Broker-Dealers; Prohibitions Respecting Certain Classes of 

Transactions Involving Employee Benefits Plans and Certain Broker-Dealers, Reporting Dealers and 

Banks, Application No. D-11687 [ZRIN: 1210-ZA25] 80 Fed. Reg. 22004 (Apr. 20, 2015), available at

http://www.gpo.gov/fdsys/pkg/FR-2015-04-20/pdf/2015-08836.pdf; DEP’T OF LABOR, EMPLOYEE BENEFITS 

SECURITY ADMIN., Proposed Amendment to and Proposed Partial Revocation of Prohibited Transaction 

Exemption (PTE) 84-24 for Certain Transactions Involving Insurance Agents and Brokers, Pension 

Consultants, Insurance Companies and Investment Company Principal Underwriters, Application No. D11850 [ZRIN: 1210-ZA25], 80 Fed. Reg. 22010 (Apr. 20, 2015), available at

http://www.gpo.gov/fdsys/pkg/FR-2015-04-20/pdf/2015-08837.pdf; DEP’T OF LABOR, EMPLOYEE BENEFITS 

SECURITY ADMIN., Proposed Amendment to and Proposed Partial Revocation of Prohibited Transaction 

Exemption (PTE) 86-128 for Securities Transactions Involving Employee Benefit Plans and BrokerDealers; Proposed Amendment to and Proposed Partial Revocation of PTE 75-1, Exemptions From 

Prohibitions Respecting Certain Classes of Transactions Involving Employee Benefit Plans and Certain 

Broker-Dealers, Reporting Dealers and Banks, Application No. D-11327 [ZRIN: 1210-ZA25], 80 Fed. Reg. 

22021 (Apr. 20, 2015), available at http://www.gpo.gov/fdsys/pkg/FR-2015-04-20/pdf/2015-08838.pdf; 

and DEP’T OF LABOR, EMPLOYEE BENEFITS SECURITY ADMIN., Proposed Amendments to Class Exemptions 

75-1, 77-4, 80-83 and 83-1, Application No. D-11820 [ZRIN: 1210-ZA25], 80 Fed. Reg. 22035 (Apr. 20, 

2015), available at http://www.gpo.gov/fdsys/pkg/FR-2015-04-20/pdf/2015-08839.pdf. 
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We note that, for our insurance company business, many of our contracts, including our 

group contracts used with qualified retirement plan clients, are required to be filed and 

approved by state insurance departments. Given changes that will be needed to 

comply with the regulation as proposed, we believe that certain contracts will likely need 

to be filed with state insurance departments. As part of this process, once a final 

regulation is published we will need to work with business units, compliance areas, legal 

counsel, among others to review the requirements and determine which contracts will 

need to be amended, what changes to make, and then draft any changes before 

submitting to the state insurance departments. The submission process itself can be 

lengthy under ordinary circumstances. Many states have unique filing requirements and 

the state insurance departments are already reviewing numerous filings they consider 

on an ongoing basis. In addition, a filing is rarely a singular event, and normally 

requires considerable correspondence back and forth between the insurance company 

and each state insurance department prior to approval, asking and answering a number 

of questions. Our experience has been that normal timing to get all 50 states’ approval 

ranges between 9 and 24 months. Although many states will provide approval within 

nine months, it can take up to two years to get approvals from all 50 states. Although 

we can legally use a contract once approved in a state, it is not practical to do so until 

all 50 state approvals are received to prevent confusion among distribution partners, 

sales and service personnel whose responsibilities cross state lines. We also note that 

a large volume of state filings from insurance companies in response to the Proposed 

Rule is certain to cause substantial delays in the filing and approval process. 

In addition to state filing requirements, we will also have to address selling agreements 

between the insurance company and different selling parties, such as insurance 

agencies, brokerages, and broker/dealers. Conversely, our retail broker/dealer and 

Registered Investment Adviser will also have to address the hundreds of selling 

agreements we have in place with the various insurance companies, mutual fund 

families, alternative investment product sponsors and other Registered Investment 

Advisers for the products that our affiliated advisors are able to offer to our mutual 

clients. These will need to be reviewed to ensure that any changes to product 
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structures still allow the agreements to work. Generally time is required for both 

negotiation among the parties and for legal resources to draft any changes. Given the 

widespread nature of the proposed regulation it is very possible that firms will be 

reviewing their due diligence and will want time for a thorough review. As with the state 

filing process, we fully anticipate backlogs to develop as all firms are seeking to 

renegotiate agreements at the same time. Not only will firms be navigating changes 

that need to be made to comply with the Proposed Rule, they will also be training and 

answering questions from those they work with to ensure that product changes are 

understood by all parties. 

We note many commenters in the hearings provided input that the eight months 

transition period is too short of a window. As a whole, these commenters were persons 

who have a sound knowledge base of how the industry works and the difficulties with 

implementation for a regulation of this type. 

It was of particular interest that even those representing plan sponsors (US Chamber of 

Commerce5and American Benefits Council6) mentioned this issue in testimony at the 

hearings. The current timeframe will not leave much time for plan sponsors to adjust 

any procedures or to provide notices to participants of the change. Many notices under 

the 404(a)(5) regulation required a 60 day advance notice to participants. Plan 

sponsors will need time to draft and distribute communications to their participants so 

they can’t wait for the last minute. That puts further pressure on service providers to 

read and interpret the requirements, make any necessary changes, provide education 

and training to our own personnel, and then provide education to plan sponsors. Eight 

months is simply not enough time given the magnitude of this Proposed Rule. 

Given these factors and ones mentioned in our original comment letter we reiterate our 

recommendation to extend the implementation timeline to at least 24 months. 

 

5

http://www.dol.gov/ebsa/pdf/1210-AB32-2-HearingTranscript2.pdf p 610 

6

http://www.dol.gov/ebsa/pdf/1210-AB32-2-HearingTranscript4.pdf p 1123 
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Education 

During the hearings, several panelists raised the concern that the Proposed Rule’s 

broadened fiduciary definition, particularly use of the phrase “specifically directed to the 

advice recipient for consideration” and the broad and subjective nature of the definition 

of a recommendation, lowers the bar so substantially that many normal-course 

interactions between individuals and financial advisors and service provider 

representatives would be considered fiduciary in nature. This could even include casual 

conversations, where there is no intent to deliver advice. 

With over 4,100 employees who are dedicated to supporting retirement plans and 

individual investors, we share this concern. We have approximately 880 employees 

and over 1,500 affiliated financial professionals, located across the country, who work 

directly with small plan sponsors, retirement plan participants, retail investors and 

financial professionals on a daily basis answering questions, conducting enrollment and 

education meetings and providing one-on-one financial education to clients at their 

worksite, at their home or over the phone. These discussions can, and often do, 

include: providing definitions of general financial and investment concepts, such as risk 

and return; diversification; dollar cost averaging; compounded return; tax-deferred 

savings; investment restrictions; fees, or other charges and early withdrawal charges. 

While the Proposed Rule’s education carve-out supports these “general” concepts, in 

reality many participants invariably seek to apply these concepts to specific investments 

made available in their employer’s retirement plan. The importance of individuals’ ability 

to access this level of support and assistance is especially important in times of 

significant market volatility as we have just experienced during August and September 

of this year. When the stock market has major, negative adjustments, investors want to 

talk with someone. That could be the financial professional they have worked with for 

years, or it may be the call center of their plan’s service provider. 

In the case of our own customer service centers, call volumes recently spiked by 20% 

over several weeks of the worst volatility. While some investors simply wanted 
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education regarding what was going on in the market, many sought to “get out of the 

market.” While each situation is different, our financial professionals and customer 

service representatives seek to remind the caller about saving for the long-term and to 

discuss goals and the best way to meet those goals. Ultimately, we seek to help the 

investor set aside the emotion of the moment and to consider all factors in order to 

make an educated decision. This often includes a review of long term objectives, 

diversification, and references to the individual’s asset allocation, necessitating 

discussion of the individual investments in that asset allocation. 

Based on our reading of the Proposed Rule, these conversations could cause someone 

to conclude that a suggestion or recommendation was being made with respect to 

engaging in or refraining from a particular course of action. Without clarity around these 

types of conversations in the Proposed Rule, call centers could decide to pull back and 

no longer have these conversations with individuals. Ultimately, in times of high market 

volatility, many more investors will be apt to succumb to emotion, make bad decisions, 

and lock in losses. Failing to provide assistance to persons who might react emotionally 

at such an important time is not in the best interests of that retirement investor, yet it 

isn’t realistic to assign fiduciary responsibility and liability to a salaried call center 

employee. 

 

We note that during the hearings, in response to panelists’ concerns that casual 

conversations would be deemed fiduciary advice under the Proposed Rule, the 

Department repeatedly stated that to be considered investment advice, a 

recommendation must be a “call to action” to invest in a particular investment product or 

to pursue a particular investment strategy. While some believe this would be helpful, 

we do not believe the Proposed Rule, as worded, supports this statement, nor do we 

believe it truly fixes the concern since counselling a retirement investor to “stay the 

course” during a market correction is in fact a “call to action”. Furthermore, encouraging 

a participant who has experienced a benefit event to stay in their former employer’s 

retirement plan rather than taking a cash withdrawal to spend today or rolling over to a 

retail option could also be construed as a recommendation to “refrain from taking a 
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particular course of action.” In order to give financial institutions confidence to maintain 

beneficial and necessary levels of assistance to investors, the Department should 

reconsider the narrowing of the definition of “education”, but should also carefully 

consider its position on exactly what constitutes a “call to action”. 

Conclusion 

The Principal Financial Group appreciates the opportunity to provide additional 

comments and observations on the effect of the Proposed Rule. Ultimately, we share 

the Department’s objective of improving retirement savings and of better positioning 

Americans to meet their retirement income needs. We believe this can be accomplished 

in a meaningful way, but much more simply than is set forth in the Proposed Rule. 

Advice can be provided in a manner that is in the best interest of the recipient, but 

without threatening basic services needed by retirement investors, without undue 

burden and cost introduced into the system, and without unrealistic implementation 

timelines. We look forward to working further with the Department on this very 

important topic, and urge the Department to work collaboratively with all interested 

parties to ensure this is done right. We cannot afford to jeopardize the savings of 

millions of Americans with hastily implemented rules that don’t consider all the 

repercussions. 

 Sincerely, 

 Greg Burrows 

 Senior Vice President 

 Burrows.Greg@Principal.com

 515-362-1844